John Perry (Sligo-North Leitrim, Fine Gael) | Oireachtas source

I would like to outline the current position of the credit union sector. The reserve position in the sector is very strong, with 95% of credit unions reporting that they meet the 10% reserve requirement. Of all individual credit unions, only 19 are below the 10% minimum, with a combined reported deficit in these credit unions of €11 million. Provisions now exceed arrears. Some 96% of credit unions are reporting a surplus and the sector is extremely liquid - in fact, excessively so. The average dividend rate of 0.9% is not sustainable, the sectoral average loan-to-asset ratio is very low, at 32%, and the sector is significantly under-lent and is sitting on a large amount of low-yielding cash.

A Central Bank PRISM review reveals its concerns about issues with regard to governance, risk management and other systems at credit union level, but these should improve over time as the new regulatory system is rolled out and beds down.

The imposition of lending restrictions is the responsibility of the Registrar of Credit Unions, who is the independent regulator of credit unions at the Central Bank. Within her independent regulatory discretion, the registrar acts to support the prudential soundness of individual credit unions to maintain sector stability and to protect the savings of credit union members.

I have been informed that it has been necessary to put lending restrictions in place in individual credit unions where there are regulatory concerns about their operation and the resultant risk to members' savings. The criteria assessed to determine the imposition of lending restrictions include, but are not limited to, the following: prudential returns, which are unaudited returns, submitted by the Registrar of Credit Unions; financial ratios, which cover levels of arrears and provision coverage; and the governance framework within the credit union. Decisions on regulatory restrictions, which are imposed in the form of directions under the Act, are made by the registrar. Other regulatory restrictions may be imposed as part of an ongoing supervisory engagement with the credit unions.

It is very important that the role of small business be facilitated. I have met a number of credit unions and know they are supporting SMEs. However, they must meet the requirements of this independent governance.

See this speech in context